Real estate business Domain could be worth $2 billion in a float

Fairfax Media is expected to announce plans for a separate ASX listing of its property classified business Domain.

The company’s shares today went into a trading halt today ahead of the announcement of half-year profit results tomorrow.

Fairfax is expected to float off the fast-growing Domain as a way of leveraging its full worth in the market without the other media assets weighing it down.

Analysts estimate Domain could have a market capitalisation as high as $2 billion. Fairfax Media currently has a market cap of $2 billion at today’s share price of 87 cents.

Competitor REA, which has realestate.com.au, has a share price of $54.84 and a market cap of more than $7 billion with revenue for the six months to December at $337.3 million, around twice as much as Domain.

Fairfax is expected to maintain a majority shareholding of between 60% and 70%.

The Fairfax-owned Australian Financial Review reported today: “The media giant is seriously considering spinning off Domain into a separately listed vehicle to be run by current Domain boss Antony Catalano.”

Fairfax told the ASX today it was preparing an announcement about Domain.

Domain is Fairfax’s fastest growing division. Here’s how its compared to the rest of the company in 2016:

Source: Fairfax Media

In 2016, revenue at Domain grew 32.7% to $296.3 million while the company’s traditional metropolitan media fell 5.4% to $574.1 million.

Domain says its has more than 90% of the national agents and listings.

Fairfax last year wrote down the value of its newspaper mastheads by $989 million, pushing the full year result for 2016 to a net loss after tax of $893.5 million. Revenue was down 2% to $1.830 billion.

Excluding write downs of more than $1 billion, underlying profit was $132.5 million, down 7.6%.